Sterling VS Commodity Currencies

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HotForex Market Review
HotForex Market Review

GBPAUD & GBPCAD, Daily

Sterling is back on an underperforming path, showing a 1.3% decline versus the dollar over the last week, and respective falls of 1.0% and 0.7% against the yen and euro. Cable has pegged a fresh 7-month low at 1.3065, while the next immediate Support comes at 1.3000 and the next longterm one sits at 61.8% Fibonacci retracement level set on 2017 ‘s rally, at 1.2900.

The increasingly urgent and ever fraught Brexit process, with major and minor businesses (including Airbus), warning that government to get a move on with regard to assuring that there will be a smooth post-Brexit customs border, has been weighing on sentiment. Things are coming to a head into EU leaders’ summit. There have been reports that many EU nations have been intensifying work on contingency plans for a no-deal scenario. Danish PM Rasmussen said yesterday, for instance, that “it is the first time we are saying clearly to the British that we can end in the worse scenario” with no deal. The BoE has long since caveated that its relatively upbeat prognosis of the UK economy hinges on a smooth Brexit.

As Brexit risks come into focus into EU leader’s summit, Pound weakness has been noticed against all major currencies. A slew of UK data is due, including Consumer confidence, 3rd release Q1 GDP and current account figures.

A big drop has been also noticed against Aussie and Loonie. GBPAUD dropped by 173 pips since Friday, below the 23.6% Fibonacci retracement level set from 1.7390 low posted on June 5. The pair is ranging within 1.7965-1.7750 range for 9 consecutive Days, with the latest 3 Daily candles increasing possibilities of a correction lower. The pair is currently trading below 50-Day MA, while momentum indicators are looking neutral.

Meanwhile,despite neutral picture out of momentum indicators and the small body candles  in the latest 3 sessions, the long down wings suggest that there is a lot of negative bias. Hence the question is whether this latest move will imply to an ending of the recovery. A reversal of June’s uptrend could be possible if the pair manage to break below the 38.2% Fibonacci level and the 20-Day MA, at 1.7730-1.7750 area. Such breakout could spell the rally for 1.7610 barrier.

Another cross that triggered my attention was GBPCADGBPCAD moved in the same way as GBPAUD within 2018, however it has been sharply driven by the bears for the last 3 consecutive days.

Today, GBPCAD crossed into the lower Bollinger Bands pattern after breaking the 50-DAY MA. This breakout along with the retest of 23.6 % Fibonacci level since May’s decline, indicate that sellers are gathering momentum of the pair. Therefore the next Support level is at the confluence of the 200-Day MA and the latest down fractal at 1.7312.

The market has been supported well by the 200-Day MA during June therefore it should be considered as a key Support level. A closing today below 23.6% Fib. level and hence a closing breach of 1.7312 barrier would encourage the market for further correction to the down to 1.7220.

In contrast to Aussie, momentum indicators here are deeply negatively configured with Stochastic sloping towards negative territory, whilst RSI crossed below neutral zone and MACD is configurating neutrally however below its signal line.

The hourly RSI just crossed 30 barrier, Stochastic moves within oversold territory and MACD oscillator increases into the negative area below its signal line, suggesting that momentum is turning from neutral to negative.  The hourly chart shows immediate support at 1.7340 and the next one at 1.7250 for today’s session.  The latest down fractal at 1.7440 could now become the next Resistance level, however a move to PP level at 1.7517 remains preferred.

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